Investment giant Blackstone is expected to team with the first of the major Nama clients to exit the toxic bank in a deal that would give access to developing swathes of houses in Dublin, the Sunday Independent understands.

Blackstone paid €1.1bn for Cork developer Michael O'Flynn's Nama loans, which include acres of prime Dublin housing development land. The sale was due to close last week, clearing the way for discussions with O'Flynn about realising value from the assets in a chronically housing starved market.

Now free of Nama, O'Flynn, a former top-10 Nama developer, retains the underlying assets behind the loans bought by Blackstone.

The next step is likely to be a commercial agreement between him and Blackstone in a move towards viable development projects. Blackstone also has the option to enforce on the loans, but this is thought less likely.

O'Flynn-associated companies are believed to have three development land sites in Dublin, where lack of housing stock has propelled rent and property prices skywards this year.

O'Flynn Construction already has outstanding planning permission to build 29 houses in Killiney at Broadlands, Ballinclea Road, planning documents show. Then there is also a prime 18-acre site on the Long Mile Road beside the Luas line, with capacity for 800 homes.

The closing of the deal with Nama allows Blackstone and O'Flynn to engage for the first time. Non-disclosure agreements on both sides mean engagement can't begin until then. The developer could not be reached for comment on Friday.

Blackstone's representatives on Irish plays are Justin Meissel and Kim Caplan. Meissel did not respond to emails on Friday.

The €1.8bn face-value loan sale dubbed Project Tower to New York private equity group Blackstone is the biggest single developer sale by Nama to date.

The loans are on high-quality property assets in Ireland, Britain and Germany, including the 17-storey Elysian tower in Cork city.

Blackstone won out in a three-way bid war between it, Lone Star and hedge fund Davidson Kempner. Earlier in the process, Lone Star was keenly tracking the book, with its interest believed to have prompted Nama to bring it to market.

Other properties in the book include student accommodation in England, Scotland and Haymarket; and a €200m office, hotel and retail development in Edinburgh. The assets have a rental roll in the region of €75m. Around 50 per cent of the properties are in Ireland.

Shortage of housing in Dublin has been described as being at crisis level, with Dublin City Council saying that only 29 houses were built in the Dublin area last year and over 16,000 applicants on the council housing waiting list. National demand for housing requires around 30,000 builds a year. In Dublin the requirement is estimated to be in the region of 7,000.